What were the effects of the financial crisis of 2008 and the ensuing economic crisis on Catholic religious leaders. While they are, of course, not the only religious leaders to opine on the crisis, I believe they have been generally representative of religious thinking on the matter. I also conflate religion with morality and intellectual life here, not because they are always aligned but because religious leaders’ main public concerns are usually moral and ethical rather than purely spiritual, and Catholic social doctrine in particular has been developed by popes such as Leo XIII and John Paul II.
The most noticeable consequence of the crisis on religion is that religious leaders have almost universally blamed the financial crisis on greed. Greed is a sin, something which clerics understand far better than mortgage-backed securities or derivatives. More specifically, they tend to blame the crisis on the greed of bankers who profited quite handsomely from the housing bubble and then from the bailouts that came after the bubble burst. Priests and bishops in Latin America have been especially prone to blame nefarious “neoliberal” forces for the crisis and what it has done to the developing world.
A prominent example is undoubtedly Pope Francis’s apostolic exhortation Evangelii Gaudium, following the 2012 Synod of Bishops on the new evangelisation. The lengthy document focuses overwhelmingly on the “Joy of the Gospel” and is clearly meant to serve religious purposes, i.e. bring people closer to Jesus Christ. Yet the section focusing on “Some Challenges of Today’s World” has some pointed criticisms of the financial crisis and the market economy in general. Here are the titles of paragraphs 53–60: “No to an economy of exclusion”, “No to the new idolatry of money”, “No to a financial system which rules rather than serves”, and “No to the inequality which spawns violence”.
In the Pope’s view, the financial crisis may have had its roots in greed, but its effects have been exacerbated by a “trickle-down” economy that has failed to benefit the poor of the world. Worse yet, the market economy creates needless material diversions and takes our attention away from spiritual concerns and love of the poor. Such a socioeconomic system is “unjust at its roots” because of widespread inequality, which eventually leads to violence. What is needed is a new approach to finance and economics that incorporates ethics and that can be governed by the State, which has primary responsibility for the common good.
Evangelii Gaudium is certainly one of the more extreme statements on market economics to be found within Catholic social teaching, but it is far from being the only one critical of capitalism. Francis’s two most recent predecessors also saw the need to incorporate ethics into the world of business and finance, but at the same time lauded the good that economic freedom has and can still achieve. It is safe to say that the 2008 crisis and its effects have led to a more negative appraisal of the global economy, especially for the first Pope coming from Latin America, where yanqui globalisation has been regularly attacked by populist leaders as a foreign imposition.
Catholic leaders in the Anglo-American world have, on the whole, been more balanced in their appraisal of the crisis. Consider the remarks of Cardinal Cormac Murphy-O’Connor on Christmas 2008, which may not be so surprising since the City of London is in his archdiocese. “Christianity neither condemns nor canonises the market economy – it may be an essential element in the conduct of human affairs. But we have to remember that it is a system governed by people, not some blind force like gravity. Those who operate the market have an obligation to act in ways that promote the common good, not just in ways that promote the interests of certain groups.” His successor in Westminster, Archbishop Vincent Nichols, quite soberly and accurately said, “Rules become a lazy proxy for morality: people think if it’s not against some rule it must be OK to do it. Such a society is inherently fragile. What is required, beyond even ethical standards of conduct, is a fundamental transformation of purpose, so that business, and the financial sector in particular, is seen by everyone as it should be, which is at the service of the rest of society. A change of language or of mission statements is not enough, and the risk of the language changing without credible reform is real.” All of which goes to show that living close to those who work in finance will not eliminate one’s common or moral sense. But unfortunately, these kinds of statements have been the exception rather than the rule.
A second consequence of the crisis has been a depreciation of the benefits of economic globalisation for the poor. As Evangelii Gaudium argued, the interdependence of the global economy spreads the risks undertaken by US banks and consumers to other countries, so there now needs to be more national control over vulnerable developing economies. Of course, this is an old Marxist canard that has utterly failed developing countries and one which development economics has long since abandoned, but it remains in circulation among the economically ignorant. Take, for instance, this recent example from Cardinal Oscar Rodriguez Maradiaga of Honduras: “The effects and consequences of the neoliberal dictatorships that rule democracies are not hard to uncover: they invade us with the industry of entertainment, they make us forget about human rights, they convince us that nothing can be done, that there is no possible alternative. To change the system, it would be necessary to destroy the power of the new feudal lords. Chimerical? Utopian? The Church decidedly bets on living the globalisation of mercy and solidarity.” He said this in Dallas, Texas, no less.
A third consequence has been that the financial crisis has somehow blinded religious leaders to the debt and entitlement crisis that is threatening virtually the entire Western world. It could be that many think the debts incurred to stabilise the financial system were worth the risk and so are the ones undertaken to save the social contract. The term “inter-generational solidarity” is one often heard in Church circles and is usually taken to mean that young and old should not live at each other’s expense. Fair enough. But I have yet to hear a religious leader speak about the dangers of leaving trillions of dollars of debt for future generations to pay off. It’s as if the promises of the welfare state for pensions and healthcare benefits were sacrosanct, to be honoured even if it bankrupts the nation. But it should be remembered that the same religious leaders also favoured increased social spending by the State, even if it came at the expense of their own institutional charitable activities, so perhaps the rooster has come home to roost.
What can be done to improve this state of affairs among the religious-minded? First and foremost, religious leaders need to remember that greed is not the purview of a particular class – there were greedy borrowers who wanted homes they couldn’t afford and greedy politicians who wanted to expand their patronage of the poor as well as greedy bankers. In fact, policies that required banks to lend to the poor and minorities are what gave us sub-prime mortgages in the first place. So rather than limit greed to the rich, we need to see it as a human problem, one that may be exacerbated by a commercial society but not exclusive to it.
Limiting certain sins to certain classes is an ideological way of looking at the problem of poverty. Study upon study has shown how economic growth has benefited the poor. It’s not very helpful to complain about unemployment while bashing job-creators and innovation, as Pope Francis himself did not so long ago in Sardinia. Where else are new jobs going to come from? If religious leaders are going to criticise the “false idol” of money, they also need to speak more convincingly about what should replace it, namely God and what He wants of us. Thankfully, Francis seems to have the ability to do this remarkably well.
Second would be to recognise the problem of moral hazard created by the bank bailouts, which is also related to the too-big-to-fail problem inherent to cosy arrangements between big business and big government. Markets don’t function when prices can’t fluctuate and businesses must be allowed to fail for making bad business decisions. If banks big enough to have the political clout to get bailed out when they make bad loans and have bad assets, it only encourages more risk- taking, not less. Religious leaders ought to speak more about moral responsibility when it comes to borrowing as well as lending, consuming as well as producing, so that act and consequence, risk and reward are better aligned. Simply castigating financial capitalism or globalisation is eventually bound to hurt the poor countries that need investment to create business opportunities and wealth.
Third, religious leaders need to find ways to address the debt and entitlement crisis in ways that don’t place the burdens of the current generation on younger ones. This is a moral crisis as much as an actuarial one and made worse by falling birth rates which religious leaders are right to worry about. Of course, not all debt is bad, if it were, all finance would be bad too. But excessive debt is a sign of profligacy and self-indulgence.
In the end, the financial crisis has many facets that are complicated to sort out, too complicated for non-specialists, and maybe even specialists, to understand completely. But one thing is clear – the moral and technical aspects of economics are intertwined. In 1985, the future Pope Benedict XVI gave an address on the Church and economy in which he spoke of the modern problem of separating the subjective and objective realms of knowledge. He concluded, “A morality that believes itself able to dispense with the technical knowledge of economic laws is not morality but moralism. As such it is the antithesis of morality. A scientific approach that believes itself capable of managing without an ethos misunderstands the reality of man. Therefore it is not scientific. Today we need a maximum of specialised economic understanding, but also a maximum of ethos so that specialised economic understanding may enter the service of the right goals. Only in this way will its knowledge be both politically practicable and socially tolerable.”
It is no accident that it was this same pope who spoke of the dictatorship of relativism upon his election to the chair of St Peter 20 years later. Religion and economics seem to be two quite distinct ways of looking at the world. But as a human endeavour, finance cannot avoid morality. Finance is a fundamental part of economics, which is a fundamental part of politics, which ultimately concerns the truth about man and how we are to live together. Getting this order wrong is when things fall apart. Religious leaders are, in the end, right about this.
Adapted from the talk given at the Danube Institute Financial Crisis Conference, 14-15 November 2013, Budapest.